Is CNBC the Great Satan of the Markets?

I like that title.


Why do I like it?


SatanIt’s very search friendly. “Satan” is one of the most often searched words. All sort of deviants and miscreants use search engines, when all they really need to do is to look into their souls.


It’s the devil within that we should all fear.


Don’t get me wrong. I love CNBC. I watch it about 10 hours each day. Although I don’t really watch it, it is more a background noise that occasionally gets me to look up while I’m doing other things.


I also included references about Joe Kernan and Herb Greenberg in the Acknowledgment section of my book, so obviously I do have a softspot for them.


But ever since I’ve been on Twitter, it’s really clear that there’s not a lot of love for CNBC, at least not by the people that I follow, and I try not to follow crackpots.


Even though I am a loyal CNBC viewer, personally, I still miss Ted David and I long for his return. But I also still pine for the return of Green Acres and as my therapist tells me, “That ain’t gonna happen”. (He’s not Ivy League)


But as much as I do pat myself on the back for being a good observer of quiet patterns, I can’t believe that I’ve missed this one.


And it was so obvious.


CNBC moves the markets. It is the six headed beast.


Now that’s not exactly an earthshaking observation. It’s on the order of Charlie Gasparino predicting that Lloyd Blankfein would depart Goldman Sachs within 2 years.


But it all crystallized for me this past Friday, the day the confusing news about Yahoo! came out.


What exactly was going on between the boards of AliBaba and Yahoo!, and Jerry Yang is still somewhat murky, but there was an obvious impact on the stock price of Yahoo!.


If you were long, that impact wasn’t very good.


At about noon, CNBC started its story on Yahoo and while the story was progressing, Yahoo! shares, which had stabilized at about $16.05 started to drop. They went down to $15.93 in the minute or so after the report.


But that’s when the observational part of my brain started kicking in. I saw what I had subconsciously seen so many times before, as I vacantly stared at the ticker.


Within about 30 minutes, Yahoo!, in the absence of any further news, started an impressive climb upward. What made it even more impressive is that it occured during the rest of the market’s decision to head south.


I took the opportunity to sell puts June 2011 Yahoo $16 puts when the underlying price was $16.


I rarely sell puts, but it clicked. This was one of those times. In the past I had sold puts on Citigroup, Sirius-XM and YRCW, all with good results. But all of those were in the $1-2 range.


What clicked was the realization that when CNBC talks, wait 30 minutes and go contrarian.


That’s not quite as catchy as the old E.F. Hutton ad campaign, but it may be much more accurate.


Years ago, when I used to watch Jim Cramer’s show, it was obvious to anyone that had bloodflow that his words would move stocks in the afterhours. This happened despite his admonishments to viewers not to make purchases in what he called the “Wild, Wild West”.


Back then, if he ever mentioned a stock that I owned in a positive sense, I always made certain to sell it in the after market, knowing that in all likelihood I would get top dollar and a chance to buy the shares back the next day at a lower price.


That’s definitely not meant to be a knock on Cramer. It’s a knock on the human traits of greed and fear, although it’s fine if other people act on those traits.


In fact, its fear that makes many people behave. Fear of ending up in Satan’s domain.


But in the markets, fear often makes people do the wrong thing.


They’re afraid of missing out when they hear good news, so they buy.


They’re afraid of being the last one left at the table when the bill comes, so they sell.


Those behaviors are good for the ones on the other side of the transaction.


Me? I have no fear, for I walk in the Valley of CNBC.

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I Never Liked Dick Bove






I usually try to be a little obscure in the daily blog titles.


The problem with getting older is that the long term memory really does stay intact and the ability to forgive and forget becomes diminished.


Now, I don’t really have anything against Dick Bove, per se, but in the past he has been as ever-present a talking head as you could ever imagine.


Shit for BrainsNow, I don’t want to you to get the wrong idea. Just because there is an image entitled “Shit for Brains”, this is in no way a representation of what I believe is present in Dick Bove’s head. After all, that wouldn’t be fair to the long and storied history of excrement.


For me, I first took notice of Dick Bove when his bald pate and perfectly trimmed beard seemed to be on CNBC every morning and afternoon giving his take on the financial institutions that he followed.


Afterall, he was a financials analyst and we were on the precipice of what would turn out to be the market cataclysm of a lifetime.


And he was the best, right?


I mean, why else would he be featured so regularly amd prominently? And you certainly would want the best to either re-assure the investment community or warn them, as appropriate.


Before I go forward, lest you think that all I plan to do is blast Bove, I would like to give him some credit for his forecasting ability. Although it was a rocky road, taking more than 2 years for the markets to recover most of the ground it lost following the 2007 meltdown, Citigroup is nearly at Bove’s price target of $45.


Granted, it’s price was significantly helped by last week’s 1:10 split, but that would be like splitting hairs.


So while Bove was continually telling the investing world that Citigroup was a solid company and that its dividend was in no jeopardy, Wall Street just burned as his talking head kept talking, oblivious to the air being sucked out of the markets.


Of course, Bove has had his credibility questioned before, in the most important of ways; the losing side of a lawsuit that was based on the accuracy of one of his calls. No reason to dredge the details of that up.


The New York Times last year characterized him as having bounced from firm to firm.


So this is the best they can come up with to assess the financial sector?


Yet for some unknown reason….


Wait, I know the reason. No one on Wall Street has anything resembling a memory.


So, they still listen to this guy. They  still invite him back.


Yesterday he did his damage again.


He used a classic terrorist strategy, perhaps pulled from Bin Laden’s recently discovered diary.


And I’m not talking about the entry when Bin Laden wrote “Fatima’s so pretty, but she doesn’t even know that I’m alive. I just want 2B friends”.


No, he focused on the strategy to go after soft targets.


And what more soft of a target is there these days than Goldman Sachs?


They can’t catch a break on anything. Imagine, they actually offered Hugh Grant the Charlie Sheen role in Two and a Half Men over Lloyd Blankfein.


As if that wouldn’t have been bad enough, Ashton Kutcher? Really?


That’s really kicking a guy when he’s down.


Bove spent the day spreading fear about Goldman and the Department of Justice.


Isn’t that the modus operandi of terorists? Fear? Soft targets?


And Charlie Gasparino was bold enough to predict that Blankfein wouldn’t last another 2 years.


Exactly how many eternities is 2 years in Wall Street years?


Anyway, you know what happened.


Goldman took another beating and you guessed it. I own Goldman shares.


What used to be about 10% of my portfolio is now about 8% and not because I sold shares.


In the aftermath of the Rajaratnam guilty verdict, Bove believes that the Department of Justice has some blood lust. He has a populist image of people wildly celebrating in front of the White House at the mere thought of Goldman convictions.


Personally, I don’t think DOJ will be going after Goldman with quite the zeal that Bove believes. The economic consequences of crippling Goldman, even in the short term has tremendous trickle down. Not good when the boss is in re-election mode.


Although the people at Goldman are deservedly called the smartest in the room, they still may need some help on this one. It isn’t easy getting out from under the grip of a terrorist


My advice? SEALS. Navy Seals.


 


 


 


 




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We are a Fickle Species

It’s sometimes very hard to understand human nature.


Without a doubt, there were still so many untapped Osama bin Laden jokes sitting out there, just waiting to be told, Tweeted and re-tweeted.


But then came the jury verdict. Even before the results became known, the Raj Rajaratnam jokes started to flow and only my own two similarly themed Bin Laden jokes could be found anywhere.


RajaratnamThey both had to do with Bin Laden’s body floating ashore someplace. I thought they were pretty funny, but no real traction because despite an admirable week’s length of attention, we’d moved onto the next and newest thing.


So at least for today, it’s going to be Rajaratnam, the butt, and apparantly I mean that both figuratively and literally of many weight related jokes.


And no, the above photo is in proper proportion.



Look, I wasn’t immune from posting a few of my own, despite my allegiance to the Bin Laden line of banter. We all want our share of the attention that is so fleeting.


And I thought of that a little while, just how fickle we really are.


Does that explain why “Buy and Hold” is a dead strategy amongst most everyone? It seems that at least when it comes to the stock market, the word “investor” may not really have much meaning.


In fact, if funds transfers would be executed and closed in the amount of time that it really should take, instead of the standard 3 business days, “Buy and Hold” would likely be re-defined in terms of minutes or hours.


I think back to the days when I used a broker and we would hold on to stocks through cycle after price cycle. Profits vanished, re-appeared, vanished again.


Since we didn’t take losses often, at the end of the day, it still felt a if the ventures were successful, but they weren’t. Really. They weren’t. All of those opportunities were squandered.


So now that I’m on my own, I’ve become very fickle, trading as often as necessary, but I’ve kept a little piece of my dignity.


I’d decided a while ago to keep the company of a finite list of stocks.


I call them my “Old Reliables”. Like a sailor’s girl in every port, although I prefer to think of them as “Sister Stocks” and I believe that God has ordained me to make them fruitful and multiply.


Each one of my favorites has a place and time. Occasionally, like Bin Laden, apparantly, I’ll bring in a new “Old Reliable” and cast another out. After all, there’s only so much male virility herbal concoction that I can ingest.


But the door is rarely irrevocably closed.


AIG is one of those Sister Stocks, an “Old Reliable”, even though it had been in the pennysphere and but for a 1:20 split, would still be at a price far below anything that I would purchase, other than to sell put contracts.


I first owned AIG back when it was American General. I didn’t own shares for a decade or so. It was noble at one time to own American General.


But now, I delight in AIG. It goes up, it goes down. I sell call contracts, I buy call contracts. I lose my shares, I get new shares.


Do I love AIG? Yes. I do. But I especially love these weekly options.


I was happy to see its decision to proceed with a much smaller “re-IPO”, as it’s been coined. I posted on Twitter yesterday that Ben Mosche was worked too hard and has too much of an ego to let AIG go so cheaply. I also believe that Geithner thinks AIG is a buy and not quite the sell that everyone was banking on.


Am I sad to see it go, if it does? No, I know it will be back.


Does that make me fickle?


Why am I asking so many questions today?


Simply because so many of our fundamental bases have been questioned in my lifetime, although each generational span probably goes through the same process.


It’s just that the process keeps speeding up, somewhat like Moore’s Law, to the point that the one time good as gold standard is like yesterday’s day old fish.


As I look at Laszlo, my dachshund, I am envious. His world and his species, are constant in their thinking and relationships.


Best of all, he’s very flexible.


But I suppose if we led the same kind of life and had the same flexibility, there might never be another generation to take us to the next unrecognizable level.


For at least today, I’ll look forward to more Rajaratnam jokes, hope AIG stays just slightly below $32 and doesn’t mind being put on the options block again next week.


 


 

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Why Speculation is Good

I don’t particularly care for speculation. But I do like speculators.


It’s somewhat akin to the expression “Hate the sin, love the sinner”, but that’s actually very hard to do, so I don’t even try.


John McCain, back when he was a decent human being, before his recent decision to try and return to that state once said about Osama bin Laden, “May God have mercy on his soul, because I won’t”.


You’ve got to like that. Too bad he went to the dark side. Come back to the light, John. Come back.


In a humorous aside, it turns out that God does not cover the seas.


Anyway, it wasn’t always that way. There was a time that I thought speculation was really the way to go. How else could you escape “The Man” holding you down?


There was a time that I thought I could outsmart the harness race track.


Then another time it was the casino and roulette.


There was even a futures period of my early life. Ironic that futures were in the past. Copper, Gold, silver, financial, wheat and corn.


Loser, loser, loser, loser, loser and loser.


Today’s blog is borne out of laziness. It’s essentially a re-hash of “Greed is your Friend”, a chapter in Option to Profit, which I will shamlelessly plug here.


So buy the book. $14.95 at respected retailers, $19.99 elsewhere.


Always go for the respected. I won’t miss the price difference.


SpeculationI now think speculation is great. Let the naysayers say that speculation has driven up the price of commodities. Gold, oil and all of those other things.


I say good for them and good for us, the end users.


Just about the only way to get us to change behaviors is to exact economic costs. What will get us to drive less? You got it. Higher gas prices.


Maybe increasing sugar prices will result in less Type 2 Diabetes.


And as used to be said on late night television “And maybe monkeys will fly out my butt”.



But I’m not a macro-economic kind of guy. I know that at some point there would have to be adverse effects on the economy, but I find that people who claim to look at the big picture, rarely do. That includes me.


All I really care about is me, and of course my readers loyal enough to buy the OTP book (another shameless plug). Mostly though, it’s about me.


And for me, speculation is great, as long as it’s others doing the speculating.


It’s on the greed of others that we prey and pray.


That’s the basis behind selling options to others. Those using leverage, seeking to hit it big with as little skin in the game, as possible are the ones that let me sleep soundly at night.


But there’s another impetus for today’s blog and that was the endless carping about Microsoft yesterday.


Just about everyone imaginable was chastising Microsoft because its stock price has been pretty range bound for the past decade. The geniuses refer to a Microsoft investment as “dead money”.


Those opinions even came from people that I respect, despite the fact that they were pretty harsh in their comments.


I tend to disagree.


But I do that as a matter of habit, anyway.


Back in the old days, my disagreement might be manifested by letting air out of tires. I always found that the diagonal combination of flat tires was most effective.


Since then, I’ve grown up. Plus, now I can just hire someone else to get their hands dirty, instead of my own.


But in this case, Microsoft has been very good to me.


It has reliably delivered a 2-4% monthly premium on its near the money options, while increasing its dividends. That 10 year chart that was shown on CNBC just made me feel that much better.


I’m a pretty analytical kind of guy, as my wife will attest as she tries to tear me away from any given spreadsheet. I continue to like Microsoft, not for its growth prospects, Uh duh, but for its prospects of my growth.


One Twitter poster, @stockguy** (identity withheld, good luck trying to figure it out), I’m talking to you, in an attempt to denigrate the call writing strategy, said something to the effect of, “well its alright for you, it may pay the rent, but for traders, it’s not enough”.


I guess my 1500+ trades a year doesn’t make me a trader and a 24-36% annual return isn’t good enough.


I don’t really think he meant it in a derogatory way, but it’s like technical analysis, you can interpret it any way you please. Besides, isn’t that what makes a market, or so they say?


Just to be clear, I’m not saying that I get 24-36% annual return. That figure looks solely at the options net income generated from trades, Microsoft being just one example.


In my responses, I got a little more detailed with numbers, as my “rent” is pretty high and using his line of thought, I may as well go and get another 5 or 6 houses, because I can, just from options premium income


Hmmm.


The problem with living in this neighborhood is that you can’t readily find someone to let the air out of someone’s tires, so you have to resort to words.


At any rate, the inference was that a “trader” is only satisfied with home runs.


A quick look at baseball statistics shows that the great homerun hitters were pretty great at at least one other thing.


Striking out.


And if you know anything about math and real life, it’s much harder to recover from a strike out in the stock market than it is to strike out.


Option to Profit teaches a way to actively manage your account, get a nice steady return and best of all, sleep at night. I guess that’s another plug, but I promise not to do so for at least a month starting tomorrow.


No homeruns. OK, maybe an occasional, but really in the stock market, homeruns are either dumb luck or insider trading. I wasn’t a genius because I held Green Mountain Coffee and had not yet written call options on it, prior to its gapping up past $65.


Dumb luck.


I certainly didn’t know anything about the Strabucks deal.


I’ve never won anything in my life so I don’t count on luck and I’m too embarrassed to evacuate my bowels in front of a prison cellmate, so I’ll stay away from any semblance of insider trading.


So to paraphrase the Dos Equis guy, “Be greedy, my friend. Be greedy”.


 


 

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What Makes Microsoft Run?



Apologies to Budd Schulberg, he probably never intended for Steve Ballmer and Sammy Glick to be mentioned in the same breath, so I won’t.


They may share some of the same lineage, but the comparison probably ends right there. On the other hand, reports of the behaviors of a young Bill Gates may have been more akin to the ruthless and one track minded Sammy, than Steve Ballmer ever could have been. But these days you would never know that, as he is busily placing fine netting over everything that moves.


Sammy GlickAs a stock, I love Microsoft, even though the investment universe looks at it as “dead money”. A look at the charts would indicate that Microsoft has been a pretty staid kind of stock, sort of like the shirts that Gates sports.


But today is a perfect example of why I love Microsoft, although its corporate name would have been far better suited for one of those e-mail spammers that has an herbal remedy to cure the Micro-soft condition that afflicts men of my generation.


Reportedly, Ballmer and company are about to part with about $8 billion to buy Skype.


Details aren’t out yet whether it was at a “Buy it Now” price or auction, as eBay still owns a piece of Skype.


There are lots of great minds out there and mine is not one of them, yet what we have in common is the asking of a simple question:


Huh?


Does Hotmail need to be jazzed up? You probably would need a Haitian Voodoo Priest to reawaken Hotmail.


The prevailing wisdom is that Microsoft would have been better off buying $8 billion in silver.


Although that’s not likely to happen, even though it could easily dip into its coffers for that type of pocket change.


But I for one, am glad that silver was not on its radar.


The problem with a ludicrously funny suggestion is that if the price of silver started to climb again, Microsoft’s stock price might actually make significant strides.


I, for one, don’t want their stock price going anywhere.


I have owned Microsoft off and on for a couple of years. It pays a dividend that keeps going up. But much more importantly, it trades in a very tight range following the March 2009 stock market rebound and pays a nice options premium on near the money call contracts.


Microsoft has become my 2.5% monthly annuity.


I love the boredom.


The nice thing about this purchase is that if it doesn’t add anything to Microsoft’s bottom line, and in fact, is written off for its full amount, it means nothing.


Conversely, if it adds to the bottom line, it means nothing.


If Microsoft spins it off, it means nothing.


Do you see the trend here?


I find great meaning in nothing.


To this day, I’m still not certain how Microsoft makes so much money.


Yeah, I understand the operating system and the little ca-ching that comes with each PC sale, but my understanding of that still comes while I pound away on Office97 and fire up my diesel powered Netscape 4.0 browser.


But I still don’t care how they make their money, as long as they just stay staid.


Was Sammy Glick boring?


BallmerHow about Ballmer?


For my portfolilo, I’ll take Ballmer any day, and besides, Hollywood is much more likely to make the Steve Ballmer story than the Sammy Glick story.


After 70 years, I think Sammy has nothing left in him to make him run.


 


Microsoft on the other hand can chug along forever under everyone’s radar all the way to my bank.





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